But with savings rates falling, it's becoming more important to ensure your cash is working as hard as possible. Here are our top tips for maximising your savings in 2025.
1. Switch to a smaller bank
Savers should always shop around for the best returns, but you'll need to look beyond the high street for the most competitive deals.
An analysis by Atom Bank found that the average rate on an instant-access saver provided by a high street bank was just 1.6% AER on 10 December 2024. That's nearly three times less than the top-paying rate of 4.75% AER as of 19 December, offered by Gatehouse Bank.
If you have a large lump sum, failing to switch to a higher interest rate could cost you a significant sum. For example, if you invested £10,000 in the average high street account paying 1.6% AER, you could expect to earn £160 in interest over a year. But if that balance was invested in an account paying 4.75% AER, your annual interest income would increase to £475.
2. Lock up your savings for longer
Savvy savers will have noticed that rates have been falling for more than a year now.
A smart move may be to lock in a top interest rate now before rates drop any further. The question is: how long should you fix for?
One-year bonds offer the best returns, our analysis of Moneyfacts data shows. The top deal on 19 December was 4.8% AER from Al Rayan Bank, available via the savings platform Raisin.
Fixing for longer provides peace of mind that your nest egg will be protected from the impact of falling rates. The longest bond offered by most providers is usually five years. The best deal for a five-year account is currently 4.52% AER from Hodge Bank.
It can be possible to lock your cash away for as long as seven years. We found only four banks that offer this option – Isbank, Shawbrook Bank, Bank of London and The Middle East, and UBL UK – and all offer below-average rates.
Find out more:3. Make the most of tax-free savings
There is a limit to how much interest you can earn on your money before you face a tax bill.
So if you have a large sum to reinvest, you might want to also consider opening an Isa, which allows you to deposit £20,000 a year tax-free.
4. Unlock higher rates via your current account
If you're thinking of switching or opening a new account to unlock a good rate, take a close look at the terms for any restrictions.
For example, some providers require you to have been a customer for a minimum time period, such as a year.
Find out more:5. Compound for greater growth
Compounding can be a powerful way to grow your savings. It means that as well as earning interest on your savings, you also earn interest on the interest itself.
The key is to re-save both the initial deposit or balance you fixed and the interest earned on it, so you can maximise your earnings.
For example, let's say you open a one-year fixed-term bond with a lump sum of £10,000, at the current top rate of 4.8% AER. After 12 months, you would have earned £480 in interest. But if you reinvest the full amount - deposit plus interest - into an account paying the same rate, you could earn £503 in interest over the following year.
If you aren’t saving for anything in particular, you can repeat every year: earning interest, on interest, on interest.
6. Try a savings platform
If you're spreading your savings around and opening multiple accounts, consider signing up to a savings platform.
These websites not only help you source market-leading accounts, but once you're registered, you'll only have one set of login information to remember. And to ensure your savings don't languish in a low-paying account, the platform will usually get in touch to remind you when any bonds are due to mature.
However, the convenience offered by savings platforms comes with a few caveats. Because savings platforms work with a set number of banks and building societies, you could easily miss a top rate offered by a provider not listed on the platform's website.
Also, watch out for fees. Although some platforms - such as Raisin and Aviva Save - are free to use, others charge a platform fee for their services. This is often taken as a cut of the interest offered, and is factored in to the rates displayed on the platform's site. Others, such as Akoni, take a percentage of your savings.
Find out more:source https://www.which.co.uk/news/article/how-to-maximise-your-savings-in-2025-aHIu01Y2qomd